How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding TE Connectivity Ltd. (NYSE:TEL) and determine whether hedge funds had an edge regarding this stock.
Is TE Connectivity Ltd. (NYSE:TEL) a buy here? Hedge funds were becoming hopeful. The number of bullish hedge fund bets advanced by 2 recently. TE Connectivity Ltd. (NYSE:TEL) was in 41 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that TEL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 39 hedge funds in our database with TEL holdings at the end of June.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s analyze the recent hedge fund action regarding TE Connectivity Ltd. (NYSE:TEL).
Dan Loeb of Third Point
Do Hedge Funds Think TEL Is A Good Stock To Buy Now?
At third quarter’s end, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TEL over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Generation Investment Management held the most valuable stake in TE Connectivity Ltd. (NYSE:TEL), which was worth $626.7 million at the end of the third quarter. On the second spot was First Pacific Advisors LLC which amassed $378.2 million worth of shares. Impax Asset Management, Third Point, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position LFL Advisers allocated the biggest weight to TE Connectivity Ltd. (NYSE:TEL), around 14.23% of its 13F portfolio. First Pacific Advisors LLC is also relatively very bullish on the stock, designating 4.9 percent of its 13F equity portfolio to TEL.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Renaissance Technologies, established the largest position in TE Connectivity Ltd. (NYSE:TEL). Renaissance Technologies had $46 million invested in the company at the end of the quarter. Mikal Patel’s Oribel Capital Management also made a $13.6 million investment in the stock during the quarter. The other funds with brand new TEL positions are John Overdeck and David Siegel’s Two Sigma Advisors, Dmitry Balyasny’s Balyasny Asset Management, and Qing Li’s Sciencast Management.
Let’s check out hedge fund activity in other stocks similar to TE Connectivity Ltd. (NYSE:TEL). These stocks are Carrier Global Corporation (NYSE:CARR), The Bank of New York Mellon Corporation (NYSE:BK), T. Rowe Price Group, Inc. (NASDAQ:TROW), Kimberly Clark Corporation (NYSE:KMB), L3Harris Technologies, Inc. (NYSE:LHX), Veeva Systems Inc (NYSE:VEEV), and Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA). This group of stocks’ market values match TEL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CARR | 46 | 1324758 | 0 |
| BK | 46 | 4657475 | -6 |
| TROW | 35 | 471726 | 11 |
| KMB | 28 | 410445 | -9 |
| LHX | 29 | 492448 | -13 |
| VEEV | 44 | 1631737 | 0 |
| BBVA | 10 | 310429 | 1 |
| Average | 34 | 1328431 | -2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1328 million. That figure was $2188 million in TEL’s case. Carrier Global Corporation (NYSE:CARR) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is the least popular one with only 10 bullish hedge fund positions. TE Connectivity Ltd. (NYSE:TEL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TEL is 78. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on TEL as the stock returned 4.5% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
Follow Te Connectivity Ltd. (NYSE:TEL)
Follow Te Connectivity Ltd. (NYSE:TEL)
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Disclosure: None. This article was originally published at Insider Monkey.
